Bush's $14 billion auto bailout? Baloney. Blagojevich's senate seat auction? A choir boy gone bad. A negative CPI? Japan, here we come. Zero interest rates? Japan, here we are. Bernie Madoff's $50 billion dollar Ponzie scheme? Now that's news.

Bernard L. Madoff's name has dominated the financial news since he was arrested last week. And the finger pointing has begun. How could he have possibly gotten away with such a blatant scam for so long? Where was the SEC? Mr. Christopher Cox, Chairman of the SEC, says he too would like to know the answer to that question. So he has launched an investigation. Yes, Mr. Cox said that several credible warnings of wrong doing were ignored by the SEC and he wants to know why. The Wall Street Journal reported (pg. A1, 12/18/08), that "Harry Markopolos - who once worked for a Madoff rival," spent nearly a decade trying to convince the SEC that Mr. Madoff's returns, (12 %/yr., year-after-year with nary a drawdown), were too good to be true." In 1999, Mr. Markopolos wrote a letter to the SEC, claiming that "Madoff Securities is the world's largest Ponzie Scheme."

Like every other government agency, the poor, little old SEC was too understaffed and overworked to pay much attention to Mr. Markopolos. Yet, its examination and enforcement staff had grown to nearly 2,000 people with a budget of more than $900 million since the Enron debacle. So the clamor for more staff, more money and more regulation is on again in full force. Will that eliminate fraud and deception?

I don't think so, but there are lessons to be learned. Mr. Steven Pearlstein, business columnist for the Washington Post writes, (The Charlotte Observer, pg. 4D, 12/18/08), that, "The solution is obvious. Turn these firms into something akin to a regulated public utility." Oh, me. It sounds like this guy has been living in Washington too long. Mr. Daniel Henninger, highly regarded columnist for the Wall Street Journal writes, (pg. A17, 12/18/08) that, "The Vosey Inheritance, a play by Harley Granville-Barker, 1914, should be on Broadway or on television. Why? To learn a few things about money that we manifestly do not wish to know."

Hmm. Do you think that maybe some of Bernie's clients knew what was going on and didn't want the music to stop? I don't know, but I do feel sorry for those who didn't know what was going on and lost their fortunes. No one should go through that, but you can't count on government bureaucrats to protect you. Learn how to protect yourself. One of the easiest and best ways to reduce risk is given in my Special Report, "Guide to Worry-Free Investing." It is to diversify in what you buy and when you buy. Do not put all your eggs in one basket. Do not bet the farm on a single trade. These are the lessons, old lessons, to be re-learned from The Madoff Take-A-Way.

P.S. For more information on mitigating risk, please click on Views, VectorVest Views, then click on Search Views at the top of your screen, type Asset Allocation in the Search Text box; then click on Search at the bottom of your screen. You may also search for Asset Allocation in our Blog at www.vectorvest.com.

AMAZING RACE.
Two weeks ago, I wrote a snippet about how much I like the QuickFolio tool in VectorVest RealTime. This week, I was actually shocked by what it showed me. Here's what happened.

On Tuesday, 12/16/08, I prepared a QuickFolio of each of the five Strategies identified in that night's Views. The next morning, Wednesday, I was sitting at my computer, looking at these portfolios in V V RealTime and waiting for the market to open. It was like sitting at the track waiting for the horses to break out of the gates. Well, the opening bell was rung and our portfolios began to move. Apparently investors were having a hangover from Tuesday's celebration because our portfolios weren't doing so good...except for Jubilee, that is. It shot out of the gate and never looked back. At one point it was up over 17%. Yesterday, a down day for the market, the Jubilee portfolio I created on Wednesday night was up again, big time...over 11%. Today's Jubilee portfolio didn't do so hot, but Langer's Longs was up 5.41%. At 10:47 AM it was up 7.79%. We got in at 10:15 AM when the NASDAQ was up 2%. Imagine how much money you can make by placing your bets on this Amazing Race.

We missed a great buying opportunity a week ago Monday and I'm not happy about it. You may recall that the Price of the VectorVest Composite got crushed on Wednesday, November 19th and Thursday, November 20th. Fortunately, the Model Portfolio was long with some high-volume Contra ETFs, so we were feeling no pain. The Price of the V V C was also down sharply on Friday, November 21st, until it was rumored that Mr. Timothy J. Geithner was to be recommended as the next Secretary of Treasury, sparking a monster reversal on huge volume. We went into cash on that rally and noted that "we are looking for a new short-term trend to develop." Why didn't I prepare you for the possible follow-through rallies that occurred on the next five days?

The reason is that I had simply become so hidebound by all the rules, procedures, conditions and restraints that we were applying to managing the Model Portfolio, that I wasn't using my head anymore. That was crazy. If I want to make big money in this market, I've got to recognize and move quickly to take advantage of great opportunities as they occur. This is what I intend to do in the future. Rules are nice, but "He who hesitates is lost." From now on I'm going to do my best to Seize the Moment.

QUICKFOLIO.
Day traders love high volatility. It gives them opportunities to quickly make huge profits. So they love what most of us hate: big, fast price movements. As far as I know, most day traders have a WatchList of volatile, high-volume stocks that they watch like a hawk. While every trader has his or her special way of playing the game, many of them live and die trading support and resistance levels. I have found this technique to be tedious, so I look for movers and shakers another way.

I use a tool in VectorVest RealTime called, "QuickFolio." It allows me to create a portfolio of stocks and track their performance from the Opening Bell with just a few clicks of my mouse. For example, I ran our "Buying Contra ETFs" strategy as of last night's close and made a QuickFolio of the top five stocks ranked by AvgVol Desc. VectorVest RealTime actually began tracking this portfolio's performance as of 8:00 AM this morning.

What I really like to do is create a variety of QuickFolios of stocks on any given day and see how they break out of the gate. Then I'll cherry pick my trades from stocks in the best performing up or down QuickFolio.

TAMING THE TIGER.
While day traders may love volatility, investors who can't sit at their computers all day hate it. So how do they make money in this jungle of a market? They execute low-risk trades by hedging their bets. Let's say, for example, that you wanted to short some stocks, but were fearful of explosive up moves that could hurt very badly. To protect yourself, you hedge your short stock positions by buying out-of-the-money Call Options. Imagine, receiving substantial credits to your account by shorting stocks and limiting your risk with relatively low-cost Call Options. To see how it's done, visit the VectorVest University to see Mr. Glenn Tompkins' outstanding "Strategy of the Week" presentation: "Taming the Tiger."